Meandering musings of some guy named Doug residing in the 'burblands of Minnesota.

Friday, July 23, 2004

Microsoft's Payout

Big story this week in the IT sector about Microsoft divesting itself of half its cash reserves - which amounts to about 30 billion dollars - to pay a $3 per share dividend to its stockholders.

This is really only terribly interesting if you know something about the way Microsoft thinks about money. Part of the reason it was sitting on 60 billion in cash was because it wants to be able to run for something like five years with zero profits. Why? So that if a competitor ever threatened them, they could drive them out of the market by dropping their prices as low as they cared to, up to and including giving them away until the competitor was driven out of business. Think Internet Explorer versus Netscape, only applied to every single market Microsoft competes in - operating systems, office suites, web browsers, e-mail servers, Web servers, programming languages - all at the same time.

It offers some interesting analysis, though it dissapointingly misses the strategic item I mentioned above. It assumes Microsoft gave up on trying to invest its 60 billion in something new. It's worth reading all the same.